Press Release No. 04/158

Press Release: IMF Approves US$8.2 Million in Emergency Post-Conflict Assistance for the Central African Republic

July 23, 2004

The International Monetary Fund (IMF) today approved a credit of SDR 5.57 million (about US$8.2 million) in emergency post-conflict assistance for the Central African Republic to stabilize the macroeconomic situation, support the ongoing reform process, and catalyze external assistance.

The authorities have committed to setting aside SDR 2.5 million (about US$3.7 million) to cover maturities falling due through June 2005.

Following the Executive Board's discussion of the request by the Central African Republic, Anne Krueger, First Deputy Managing Director and Acting Chair, said:

"Political stability and security conditions in the Central African Republic (C.A.R.) have continued to improve, and the authorities are to be commended for the implementation of key economic reforms, notably in the areas of public finances and governance. Significant additional efforts will, however, be needed to rekindle economic activity following its sharp contraction in 2003, and to reverse the deterioration of social conditions. The authorities' continued commitment to their reform agenda as well as increased assistance from the international community will be critical in advancing the rehabilitation of the economy.

"The government's program for the second half of 2004, which will be supported by the Fund's Emergency Post-Conflict Assistance policy, aims at addressing the aftermath of the conflict in a comprehensive way. It appropriately focuses on improving public finances, strengthening good governance and increasing the delivery of social services.

"The government's efforts to further enhance revenue collection are welcome, particularly the envisaged tax administration measures aimed at strengthening controls, reducing fraud and increasing accountability. Similarly, the authorities' plans to strengthen public expenditure management and to maintain strict control on non-priority spending will help ensure that limited public resources are properly allocated to essential social expenditures. It will be important to resist political pressures to increase spending ahead of the elections, and to sustain and deepen the effort to contain the wage bill, given the large share of public expenditure absorbed by salary payments.

"The authorities have taken commendable steps to enhance governance, and are committed to strengthening the government's ability to prosecute corruption cases and defend its financial interests in legal disputes. Continued progress will also be needed in improving management and transparency in the natural resources sectors, to support a rebound in economic activity and increased tax revenue.

"The authorities have started to address the disturbing situation in the social sectors. Further sustained efforts, with support from the international community, will nevertheless be needed to reverse the deterioration in recent years and to make progress toward the Millennium Development Goals (MDGs). A solid track record of policy implementation will allow the C.A.R. to move toward a medium-term economic program that could be supported by the Poverty Reduction and Growth Facility and pave the way for debt relief under the enhanced HIPC Initiative," Ms. Krueger said.